How to Donate Inventory for a Double Tax Credit

Donating inventory for a double tax credit is a process that will vary depending on where you live. Find out how to donate inventory for a double tax credit with help from a senior financial analyst in this free video clip.

URL:

Embed:

Video Transcript

Hi, I'm Jackie Jackson, and I'm going to talk to you about how to donate inventory for a double tax credit. Now under most circumstances, there is no legal way to claim a double tax credit for donating inventory. The way that you determine how much you can get as an exemption for the inventory that you've donated is that you have to take either the lower of the fair market or the tax basis value of the item that you're donating .And in order to determine the tax basis you need to have taken day one inventory at the beginning of your fiscal year so that you can look at how much your inventory value has been reduced after donation. If you don't have that zero basis donation value then you're not going to be able to determine which is lower, the fair market value or the tax basis and that's what the IRS requires. And after you've determined which is the lower value, you add that to the cost of goods sold and by increasing the amount of the cost of goods sold that you subtract from your income you lower the tax basis of your income and you therefor lower your taxes. That's how it typically happens. Now under some special circumstances you are eligible for a double exemption however you need to look at IRS code 7E3 to determine if your specific circumstances are applicable.